Tort/Negligence – FTCA – Medical Malpractice – Remedies – California Law – Reversionary Trust

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Cibula v. U.S. (Lawyers Weekly No. 12-01-0040, 14 pp.) (Motz, J.) No. 10-1245, Jan. 9, 2012; USDC at Alexandria, Va. (Lee, J.) 4th Cir. Click here for the full-text opinion.

Holding: In this case in which a family won a multi-million dollar Federal Tort Claim Act award from the U.S. for their child’s brain damage caused by government doctors, the 4th Circuit remands the case for a second time for the Virginia federal district court to grant the government a reversionary interest in the child’s future care award under the controlling California law.

After the negligence of government doctors in California caused significant and irreversible brain damage to J.C., his parents Jennifer and Andrew Cibula sued in Virginia federal court under the Federal Tort Claims Act. Following a bench trial, the court found the U.S. liable and awarded the Cibulas $2,704,800 for past care costs, $250,000 for J.C.’s pain and suffering, $250,000 for the mother’s  pain and suffering, $2,360771 for J.C.’s lost future earnings and, most relevant to this appeal, $22,823, 718 for future care costs.

The U.S. argued California law permitted it to retain a reversionary interest in the future care award. The district court rejected this argument because it concluded Virginia law governed and did not permit this remedy. Applying Virginia law, the court ordered the future care award be placed in a non-reversionary “trust for J.C.’s benefit” to be established and managed by a court-appointed guardian ad litem.

On appeal in Cibula I, we agreed with the government that the district court erred by not applying California law, and remanded the case. On remand, the district court concluded it was unable to craft a suitable reversionary trust that reconciled “the competing objectives” of the FTCA and California law. The court ordered that the present-value future care award be placed into a special needs trust for the benefit of J.C., to be administered by his GAL, but the trust contained no reversion provision. The U.S. again appeals.

As we held in our earlier appeal, California law controls. Under California’s Medical Injury Compensation Reform Act, a private defendant in a medical malpractice award may elect not to make a lump sum award but instead to compensate a plaintiff for future damages by periodic payments, which largely cease upon plaintiff’s death.

Both the Cibulas and the government recognize that, due to the government’s inability to shoulder continuing obligations, the FTCA permits courts to craft remedies that “approximate” state periodic payment statutes, including reversionary trusts. Our opinion in Cibula I suggested as much, as we remanded for the district court to craft a remedy consistent with California’s periodic payment statute while acknowledging that the FTCA has been interpreted to prohibit ongoing obligations against the U.S.

The only issue before the district court was the government’s entitlement to a reversionary interest in that award. The district court offered no rationale as to why granting the government a reversionary interest would impact the sufficiency of the award.

Some portion of the trust funds could purchase an annuity to guarantee a stream of periodic payments while investing the remainder of the funds. Because the district court fashioned the present value award based on its conclusion that J.C. had a normal life expectancy, 64.8 additional years, the cost of an annuity to fund the full value of J.C.’s future care costs could be significantly less than the $22,823,718 lump sum award ordered by the district court. Allowing the Cibulas this kind of flexibility would provide an advantage over the fixed, non-modifiable periodic payments that the California statute dictates for plaintiffs in cases in which defendants remain liable on the judgment.

Because granting the government a reversionary interest in J.C.’s future care award eliminates the potential for a windfall without in any way rendering the award less sufficient compensation for J.C., we find such a remedy approximates the California statute in a manner that is consistent with the FTCA. We remand the case with instructions for the district court to fashion such a remedy; we affirm in all other respects.

Affirmed in part, reversed in part and remanded.